Refining glut

Over the past two to three years, global refining capacity has taken a serious hit, and the effects are rippling through diesel and gasoline markets worldwide.

Russia's refining collapse

Since March 2024, Ukrainian drone strikes have systematically targeted Russian refineries — Ryazan (nearly 5% of national output), Syzran, Saratov, and others. Ryazan alone has been hit nine times in 2025. The cumulative effect: Russian crude processing has fallen to its lowest level in 21 years. Domestic gasoline demand (~36M tonnes/year) was already running close to prewar production (~41M tonnes), leaving little cushion. Moscow has responded by banning exports of gasoline, jet fuel and diesel through at least May 2026 — and Russian citizens are now facing long lines and empty pumps.

U.S. capacity losses

LyondellBasell's Houston refinery closure alone removes roughly 400,000 bpd of capacity. In California, two refinery closures will eliminate 17.5% of the state's in-state refining capacity — though its large renewable diesel supply (70% of the state's diesel pool) is expected to cushion diesel prices more than gasoline prices, which are projected to rise more sharply.

A longer structural shift

More than ten refineries across Europe and North America have closed since 2015. Meanwhile, Kuwait, the UAE, Iraq and Saudi Arabia have built or expanded major refineries, roughly doubling Middle East diesel exports between 2017 and 2025 and overtaking North America as the world's top diesel-exporting region.

The price impact

Diesel crack spreads have hit record highs in multiple markets as Russian supply has nearly vanished from export markets, Russian gasoline shipments to neighboring countries dropped 34%. In the U.S., EIA modeling shows even modest refining constraints can add measurable cents per gallon to wholesale and retail gasoline prices, and the agency forecasts gasoline, diesel and jet fuel inventories falling to their lowest levels since 2000 by 2026.

The price impact

Diesel crack spreads have hit record highs in multiple markets as Russian supply has nearly vanished from export markets, Russian gasoline shipments to neighboring countries dropped 34%. In the U.S., EIA modeling shows even modest refining constraints can add measurable cents per gallon to wholesale and retail gasoline prices, and the agency forecasts gasoline, diesel and jet fuel inventories falling to their lowest levels since 2000 by 2026.

Diesel is especially inelastic: trucking, agriculture and freight can't simply switch fuels when prices spike, which makes refining capacity one of the most consequential, and least discussed, variables in today's energy markets.

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